Our
hotel lawyers were at The Lodging Conference in Phoenix last week,
taking the
measure of the hotel industry. It was pretty interesting. Some said
August was
a "turning point" and they were not referring to a good thing.

At the
Hotel Law Blog, what happens in Phoenix does not stay in Phoenix.
Here's what
we heard.

"It's
not just me. The market has changed in just the last 60 days!"

While
many people at the Lodging Conference said recent market volatility had
no
impact on them, their transactions or their deals, this was clearly not
the
case for all.

A
widely-held view was that it seems like someone hit the "PAUSE"
button on hotel finance and purchase-sale transactions. Some fear a
"reset" button may also have been tripped. The global market turmoil
of the past 30-60 days triggered by the inability of our politicians to
resolve
deep U.S. budget issues, along with questions about political resolve
by
European governments to deal with their own problems continue to raise
major
issues.

And
there are all the usual specters of big increases in taxes, continued
high
unemployment, sagging consumer confidence, rising labor costs, rampant
inflation to deal with $14 trillion of debt, operating costs rising
faster than
RevPAR as well as war, plague and pestilence.

So
here are some insights from industry leaders and vignettes JMBM's hotel
lawyers
gathered at the Phoenix Lodging Conference. In many cases we have
omitted the
speaker's names because I was not certain that the comments were
intended for
attribution.

INSIGHTS

Mark
Woodworth
President, PKF Hospitality Research

I am
having a hard time being negative.

Our
worst case scenario based on a 25% chance of a recession will still
show RevPAR
growth at a 2.4% increase, which is long-term RevPAR growth average.
Positive
RevPAR growth is still positive.

Bruce
Baltin
Senior VP, PKF Consulting USA

The
fundamentals of the industry are holding up well.

On the
transaction side, the first part of the year was very active. We were
even
doing feasibility studies on new hotels.

All
markets will be capped out next year. But we saw a definite slowdown in
late
July and August. Things have slowed way down in the last 45 days.

A lot
of people are saying, "The fundamentals are good, let's keep moving."

Thomas
M. Geshay
SVP , Davidson Hotels & Resorts

Declining
numbers creates uncertainty on how to underwrite a deal.

We
were bidding to buy a property but our bid was 8% lower than the
highest
bidder. The seller went with the highest bid which needed financing. 60
days
later, the high bid could not get debt. The seller came back to us, but
by then
our REIT partner was gone and we could not do the deal we could have
done 60
days earlier.

Everything
is taking longer. Everything we have done is all cash. No debt.

2010
was a great year. This will be a good year -- a little bit off last
year. We
think next year will be great. Maybe this has made sellers more
realistic with
the REITs on the sidelines.

We
think this is an opportunity for guys like us to be competitive without
losing
to the REITs every time.

James
T. Merkel
President & CEO, RockBridge Capital, LLC

We
don't think over the next 5 years the economy will shrink.

Buy
the right asset. Position and capitalize it correctly and you will be
OK.

A lot
of hotels need capital. There has been a standoff on the needed PIPs.

The
cost of debt is attractive.

Bernard
N. Siegel
Principal, KSL Capital Partners, LLC

We are
trying to push rates, but in the last 30 days, that has not been
achievable.
There is a market reset going on like in 2008.

We
thought to be in the middle of a very strong recovery off a low bottom,
but
this [development of the last 60 days] changes everything.

VIGNETTES

And
here are some "vignettes" or stories recounted . . .

Vignette #1

An
established hotel owner had a deal to buy a major urban hotel property
and
financing was in place, but was pulled at the last minute because the
lender's
economist decided that the market was too volatile. The buyer only
needed 50%
LTV on the purchase (with a nice repositioning value-add play), but
could not
find any financing at better than 30% LTV. Volatile, unsettled markets
killed
the deal.

Vignette
#2

An
established owner-operator has started seeing group business
cancellations. In
one case the cancellation fee is greater than what it would have cost
if they
went forward with the group meeting, but the customer felt holding the
event
would send the wrong message.

But
Tom Naughton, Managing Director and Principal of Clearview Hotel
Capital, LLC
had a different experience.

We are
not seeing same cancellations we did in fall of 2008.

Destination
group markets with incentive business, product launches, and the like
-- these
are still intimidating markets. It is too early to tell on the group
side.

Vignette
#3

A bank
lender in the hospitality industry started pulling back on lending,
pulling
term sheets and backing away from deals. They say that August was the
"turning point."

Vignette
#4

One of
the major brands' reported that they have seen some deals falling out
of bed in
the last few weeks. They say that groups with capital with be the
winners in
this environment.

NOTABLE
QUOTABLEs

Gregory
T. Mount
President, Richfield Hospitality, Inc.

We
have been active on the acquisition front and will continue to do so.

I just
returned from China where we are working on another 10-20 hotels.

The
last 30 days has not had much of an impact on us.

We are
working on bringing our parent company REIT over to the U.S. to acquire
assets
over the next 12-18 months.

Stephen
L. Van
President & CEO, Prism Hotels & Resorts

Half
of our business is distressed hotels. We are hiring a lot of people. We
have 41
new hotels coming in between now and the end of the year.

Jack
Levy
SVP Finance, Pyramid Hotel Group

How
you are doing is market-by-market. For example, Hawaii was great in 1st
quarter
of 2011 but not good after the tsunami hit in Japan.

We
have not seen cancellations yet and are optimistic about next year.

Kevin
D. Mahoney
COO, Stonebridge Companies

We
have not seen any impact from the recent market turmoil . But maybe
this has
leveled out the playing field for opportunities . And it is causing us
to focus
on what has to be delivered to our shareholders and owners by end of
the year.

Paul
Novak
President, Bedrock Partners

The
challenge in the last 30-90 days is finding financing, even 50%
financing.

The
biggest challenge we all face is if and when financing market comes
back.

This
creates an opportunity for private funds with a lots of cash available.

"Some
people have good assets with good cash flow and no need to sell. They
are not going to do anything right now."

"There
is pressure for deployment and redeployment of assets."

"It's
not just me. The market has changed in the last 60 days"

"Everyone
is taking a closer look, taking more time."

What's it all mean?

The
lack of confidence in the economy, and roiling of the markets is having
a
significant impact on some, perhaps many. Where we go from here depends
on how
you see the next few months unfolding.

The
fundamentals for the hotel industry are good! They are improving. The
stage is
set for continued improvement in ADR and profit margins. But some are
having
trouble in pushing rate while others are not.

Will
our Congress resolve the postponed budget crisis or will the U.S. take
another
hit to its credit rating? And how about Europe? What will happen with
Greece,
Italy, Spain and Portugal? Will the euro survive? Can slowing economies
in the
US and Europe avoid slipping back into a global recession?

Will
the political mess, volatile markets and business uncertainties keep
leisure
travelers home and lead businesses to curtail travel? Or will the
bifurcated
economy continue to see the employed continue to travel, and businesses
proceed
to book hotel rooms on pent up demand.

The
next few weeks should tell us a lot. There is either a more level
playing field
and great opportunities for those with cash, or some very uncertain
times
ahead. Maybe a 3-5 year investment horizon solves those uncertainties.
Or maybe
it doesn't.

________________________
This is Jim
Butler,
author of www.HotelLawBlog.com
and hotel lawyer,
signing off. We've done more than $60 billion of hotel transactions and
have
developed innovative solutions to help investors be successful in
bidding for
hotel acquisitions, and helping investors and lenders to unlock value
from
troubled hotel transactions. Who's your hotel lawyer?

________________________

Our
Perspective. We
represent hotel lenders,
owners and investors. We have helped our clients find business and
legal
solutions for more than $60 billion of hotel transactions, involving
more than
1,300 properties all over the world. For more information, please
contact Jim
Butler at [email protected]
or +1
(310) 201-3526.

Jim
Butler is a founding partner of JMBM, and Chairman of its Global
Hospitality
Group® and Chinese Investment Group™. Jim is one of the top
hospitality
attorneys in the world. GOOGLE "hotel lawyer" and you will see why.

Jim
and his team are more than "just" great hotel lawyers. They are also
hospitality consultants and business advisors. They are deal makers.
They can
help find the right operator or capital provider. They know who to call
and how
to reach them.

JMBM’s
Global Hospitality Group®

The
hotel lawyers in the Global Hospitality Group® of
Jeffer Mangels Butler & Mitchell (JMBM) comprise the premier
hospitality
practice in a full-service law firm and are the authors of the Hotel Law Blog. We
represent hotel owners, developers, investors and lenders and have
helped our
clients find business and legal solutions for more than $60 billion of
hotel
transactions, involving more than 1,000 properties worldwide. For more
information
about the Global Hospitality Group®, go to www.HotelLawBlog.com.
For more information about full range of legal services provided by
JMBM, go to www.JMBM.com.